Qatar Adds Shell to Phase 2 of LNG Expansion

Shell has won the second international equity stake in North Field South (NFS) — Phase 2 of Qatar's 48 million ton per year LNG mega-expansion — Shell and QatarEnergy announced on Sunday.

The company was awarded a 9.375% interest in the two-train 16 million ton/yr NFS project out of a total 25% interest available to international partners. QatarEnergy will hold the remaining 75%.

TotalEnergies was also awarded a 9.375% stake in NFS last month.

QatarEnergy is also in the process of awarding engineering, procurement and construction (EPC) contracts for the LNG mega-expansion.

Last week, Italy's Saipem said it was awarded a $4.45 billion EPC contract for the giant North Field, which will provide the feed gas for the new liquefaction capacity.

NFS is known to have slightly higher production costs than Phase 1, "but it is still a world-class asset," Saad al-Kaabi, Qatar's energy minister and CEO of QatarEnergy told Energy Intelligence in an interview last month .

Completion of the 32 million ton/yr Phase 1 (North Field East) and Phase 2 expansions will raise Qatar's total LNG production capacity to 126 million tons by 2027.

Shell Offsets Sakhalin Loss

At the signing ceremony in Doha, Shell CEO Ben van Beurden underlined LNG's crucial role in ensuring reliability of the energy system and supporting energy security and the energy transition — "two of the most fundamental challenges the world faces today."

"The new LNG volumes, which Qatar will bring to the market, come at a time when natural gas assumes greater importance in light of recent geopolitical turmoil, and amidst the dire need for cleaner energy to meet global environmental objectives," al-Kaabi said.

Shell has the largest LNG portfolio of the Western energy majors and has focused on acquiring a diverse set of flexible supply sources for trading and optimization.

The 9.375% stake will give Shell another 1.5 million tons/yr of Qatari LNG when the NFS expansion comes on line, adding to the roughly 2 million tons/yr it will get from its 6.25% stake in North Field East.

Shell — the world’s top LNG portfolio player — had 31 million tons of liquefaction capacity around the world last year and sold a total of 64.2 million tons of LNG for the year.

The Qatari additions are a welcome boost after the company took 2.8 million tons of annual liquefaction capacity from Sakhalin-2 off its books after Russia's invasion of Ukraine.

Shell has since lost its 27.5% stake in the Sakhalin-2 project altogether after the Kremlin established a new operating company.

QatarEnergy is already the largest single LNG producer in the world and al-Kaabi has indicated that the company plans a major push into trading in addition to its array of long-term supply contracts.

The Usual Suspects

Shell and Total had already been selected for Phase 1 of the expansion earlier this year and al-Kaabi had said that the Phase 2 partners were likely to be selected from the pool of winners in the first phase. That group also included Exxon Mobil, ConocoPhillips and Eni.

Al-Kaabi had told the Energy Intelligence Forum earlier this month that QatarEnergy was close to selecting the remaining partners for Phase 2.

"We are done with almost everything. We are just defining the date of when my counterparts can come to Qatar to celebrate," he said.

QatarEnergy said on Sunday that "a third partnership will be announced in due course."